What is the medium-term outlook for the ECB's monetary policy?

The first important point is that the ECB will be under pressure from the Federal Reserve's behaviour : the Fed has announced that its new strategy is to maintain an expansionary monetary policy until full employment is achieved, which may take the form of accepting inflation above 2% to compensate for the period when inflation is below 2%. If the ECB does not follow the same policy, it runs the risk of a sharp appreciation of the euro. The ECB may also be forced to switch to "average inflation targeting", which allows it to accept higher-than-target inflation when it was lower beforehand. The second important point is that even if the ECB maintains a very expansionary monetary policy for a long time, countries will in the long term have to refinance the government debt issued today at interest rates that are much higher than current rates if the ECB one day abandons this policy. This is not a problem for debt that finances efficient investments, but it is a problem for debt that only finances cyclical support. It is therefore prudent to reserve the debt for these efficient investments, as there is no guarantee that the ECB will keep long-term interest rates very low forever or perpetually roll over the debt purchased now.